‘Philippines to ease currency rules further’

The Philippine central bank will ease foreign-exchange rules further this year by reducing restrictions on required documents and approvals needed for some transactions, central bank governor Nestor Espenilla said.The reforms have the “objective of deepening the foreign-exchange market, increasing efficiency and reducing the cost of doing business,” Espenilla said in an e-mailed reply to questions on Wednesday. The changes in foreign-exchange rules will be unveiled “within the year,” he said.Espenilla is pursuing a pledge he made when he took office in July to ease foreign-exchange regulations, coming at a time when the peso is trading near an 11-year low against the US dollar. Last year, the central bank increased the amount of foreign currency companies and individuals can buy without documentation. The rules will simplify registration, enhance data gathering, increase transparency, improve price discovery and add products, including those for hedging, Espenilla said.“We will streamline requirements for the banking system to reduce market fragmentation and increase foreign-exchange liquidity,” Espenilla said. Easing rules may also help to divert currency flows from less-regulated companies, like money changers, to more formal channels such as banks, he said.The peso was little changed at 51.095 against the dollar as of 10:40am in Manila yesterday, taking its decline this year to 2.7%, the worst performer in Asia.“Cutting the cost of doing business is definitely positive for the economy,” said Gundy Cahyadi, an economist at DBS Group Holdings Ltd in Singapore. “As for the impact on the currency, it really depends on the actual measures. While mindful of volatility, the central bank seems rather tolerant of the peso weakening for now.”The central bank is also improving its market surveillance tools to help cushion the economy from volatile financial markets. The regulator is developing an index measuring volatility in local equity and foreign-exchange markets that stems from outside the country.The central bank will also improve some existing indexes by strengthening an index providing a snapshot of stress in foreign exchange, equity, bond and money markets, updating of a metric that measures banks’ stress and that estimates the cost of assisting them in periods of shock and enhancement of nationwide residential real estate property price index by breaking it down by region and segment of housing market.“The current objective of preserving economic and financial resilience underscores the need to refine and expand the surveillance tools,” Espenilla said. “It is important to calibrate these measures in order to accurately measure the state of stability and stress in the economy.”